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Consider the following cash flows: Year O-NM Cash Flow -$5,100 1,500 2,600 1,300 1.000 What is the payback period for the cas

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Answer #1
Year Cash flows Cumulative Cash flows
0 (5100) (5100)
1 1500 (3600)
2 2600 (1000)
3 1300 300
4 1000 1300

Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=2+(1000/1300)

=2.77 years(Approx).

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